Since its founding, Spirit Airlines  (SAVE)  has been popular among budget airlines. It is known for its ultra-low-cost business model, where the base fare only covers transportation, and travelers must pay for nearly everything else.

However, when the Covid pandemic crashed the tourism sector, some airlines recovered, and some didn’t. Spirit Airlines has not disclosed an annual profit since 2019, losing more than $2 billion over the last five years.

In 2022, its plan to merge with another budget carrier, Frontier Airlines, failed, resulting in more challenges for the struggling airline.

In November 2024, Spirit Airlines filed for the first Chapter 11 bankruptcy protection, from which it exited by March. 

The carrier didn’t manage to recover completely, suggesting it continues to face existential challenges because of fierce competition and weak demand, according to the August Form-10Q filing with the Securities and Exchange Commission.

Spirit Airlines acknowledged that it has restructured certain of its debt obligations but also reaffirmed that it continues to face challenges.

However, the Company has continued to be affected by adverse market conditions, including elevated domestic capacity and continued weak demand for domestic leisure travel in the second quarter of 2025, resulting in a challenging pricing environment.

In August, Spirit CEO Dave Davis suggested that the second bankruptcy might bring more opportunities. In the latest development, Spirit Airlines obtained a bankruptcy lifeline.

 Spirit Airlines secures $475 million lifeline from creditors amid second Chapter 11 filing. 

Image source: Shutterstock

Spirit Airlines secures a $475 million bankruptcy lifeline

On August 29, the carrier confirmed it filed for the second Chapter 11 bankruptcy, listing its assets and liabilities of between $1 billion and $10 billion.

The first Spirit Airlines bankruptcy was focused on reducing funded debt and raising equity capital. However, the CEO stated that “it has become clear that there is much more work to be done and many more tools are available to best position Spirit for the future.”

Related: United Airlines adds game-changing perk to win over customers

On September 30, in a court hearing, the airline announced that it had made significant progress in its ongoing Chapter 11 bankruptcy by negotiating a multi-tranche debtor-in-possession (DIP) financing facility of up to $475 million.

The DIP facility is secured with its existing bondholders, and it reportedly will offer the carrier financial flexibility to support its normal operations during the restructuring period.

The DIP financing is subject to court approval, with a hearing scheduled for October 10, 2025. The first $200 million is expected to be available immediately upon court approval.

As part of its motion for the use of cash collateral, Spirit Airlines obtained immediate interim access to $120 million of liquidity.

Spirit Airlines reaches deal with AerCap Ireland for $150 million

Spirit Airlines has also signed an agreement with its biggest aircraft lessor, AerCap Ireland Limited, under which AerCap will pay Spirit $150 million.

Additionally, Spirit will reject leases on 27 aircraft, in an effort to lower operating expenses by hundreds of millions of dollars. 

Huebener explained in court that 25 of those airplanes are grounded or will be grounded for inspection, due to a Pratt & Whitney engine defect.

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The proposed agreement also resolves all claims and disputes between AerCap and Spirit and provides for the future delivery of 30 more airplanes.

This agreement is subject to court approval and will be considered at the October 10 hearing.

Spirit CEO Dave Davis praised these steps in a news release:

These are significant steps forward in a short period of time to build a stronger Spirit and secure a future with high-value travel options for American consumers. While there’s more work to be done, we’re grateful to our stakeholders who have stepped up to support us during the restructuring.

According to a court filing, and as reported by CNBC, senior secured noteholders at Spirit include:

  • Citadel Americas
  • Ares Management
  • AllianceBernstein
  • Arena Capital Advisors
  • Pacific Investment Management Company

Spirit flight cancellations, employee furloughs

The court approved Spirit’s motion to reject 12 airport leases and 19 ground handling agreements in an effort to reduce costs and rationalize the network.

In September, the carrier confirmed it will eliminate more than 40 routes to different parts of the country and completely exit various markets. Spirit completely cut service from Minneapolis-St. Paul International Airport (MSP) and Bradley International Airport (BDL) in Connecticut’s Hartford.

Related: Spirit Airlines cuts more flights and jobs amid second bankruptcy

These cuts came after its exit from more than 10 cities, including Boise and Albuquerque.

Moreover, since the beginning of the year, Spirit Airlines has furloughed around 800 flight attendants and 400 pilots. Another 1,800 employees face potential layoffs. 

“A third of its total crew members risk being let go as part of the carrier’s drastic cost-cutting measures,” writes Veronika Bondarenko for TheStreet.

Companies have survived bankruptcies; Spirit is optimistic

Larger competitor airlines continue to make it difficult for Spirit Airlines to recover, as they launch their own “basic economy” tickets and various perks and offerings.

Spirit’s main competitors — United Airlines, Frontier Airlines, JetBlue Airways, and Allegiant Airlines — have recently launched new routes to attract Spirit’s customers, while United CEO went on to say that he thinks Spirit will go out of business “because I’m good at math,” reported CNBC.

Related: American Airlines makes major move to boost flyer benefits

Meanwhile, Spirit Airlines restructuring lawyer Marshall Huebner said in a Sept. 30 court hearing that the carrier is making “massive progress” to recover from the bankruptcy, reported CNBC.

Huebner noted in the U.S. Bankruptcy Court that people who don’t have faith in Spirit’s survival should “say less” and look at what the carrier is doing.

Spirit Airlines is not the only carrier going through bankruptcy. Over the past 25 years, three of the four biggest airlines in the United States — American Airlines, United Airlines, and Delta Air Lines — have all filed for bankruptcy and survived.

Major companies that recovered from bankruptcy include:

  • American Airlines
  • United Airlines
  • Delta Air Lines
  • Marvel
  • General Motors
  • Chrysler
  • Six Flags

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